City approves financial management plan

By BRENDA ALLUMSnews1@kilgorenewsherald.com

Managing the financial resources of a city -- no matter its size -- is a serious business.

Recently, Kilgore City Commissioners approved a Financial Management Policy that City Manager Jeff Howell describes as a “financial operating procedure.”

Howell said, to his knowledge, Kilgore has never had written guidelines that outline financial procedures for the city.

He said former Interim City Manager Ernie Clark identified that a financial policy statement for the city did not exist. Howell said his background as city manager for Bridgeport and his work with the city of Fort Worth gave him a working knowledge of what should be included in the policy.

“The city has been using standard operating procedures, but has not had a written policy to date,” he said. “The aim of the recently-approved policies is to ensure that financial resources are available to meet the present and future needs of the citizens of Kilgore.”

Kilgore’s City Charter places responsibility for financial management on the shoulders of the city’s financial officer, which by default is the city manager. Lawanna Chrisman is the assistant director of finance.

Howell said the guidelines deal mostly with minimum levels for fund balances -- the difference between income and expenditures.

“This will help identify the level we want to set as a minimum and options we can use to set aside funds for such things as capital improvements.”

The city manager said cities should keep enough operating capital available to be able to operate for a specified amount of time without any income should such a crisis situation arise.

“Some cities retain operating reserves for three or six months,” he said.

Howell said the city handles a lot of money that is restrictive in nature. For instance, the cemetery fund.

“Money from the sale of lots in the city cemetery is set aside for perpetual care and only the interest from the fund is used,” Howell said. “Other restrictive funds are grants that must be used for specific purposes.”

He said there are a number of bank accounts on the city’s books that have been dormant for years.

“We’re looking at closing out accounts with little or no money in them,” he said.

As for investments, Howell said “guidelines for investing city funds is fairly restrictive.”

“Cities can not invest directly in stocks or junk bonds,” he said.

Municipal funds can be invested in such funds as TexPool, TexStar and federal mortgage notes (Fannie Mae).

TexPool and TexStar are local government investment pools created on behalf of Texas entities whose investment objectives are preservation and safety of principal, liquidity and yield consistent with the Public Funds Investment Act.

Both are committed to maintaining safety and stability.

“The city uses the services of a financial adviser to help in determine how to invest the money,” Howell said.

First Southwest is the city’s financial adviser.

Howell said because of the state mandates the city’s investments “are safe. Consequently we don’t earn a large return but we do get a reasonable rate of return.”

Howell said the state developed strict statutes concerning municipal investments after an incident in 1994 California.

“Orange County had some bad investments and got into a big financial mess, eventually declaring bankruptcy. States saw a need to restrict how investments were made by cities and the mandates are a safeguard for taxpayers’ money.”

Howell said the new financial policy is the first step in putting a budget together for the coming year.

He also said this was part of the process for submitting the Kilgore budget to the Government Finance Officers Association for recognition as outstanding.

“This (would be) a very prestigious award for the city to get,” he aid. “It indicates the city has a good budget and budget process.”